Hollywood gets bump from slump

Summer box office on the rise

Is the skyrocketing cost of gas good for the movie biz? Are people more pumped for escapism thanks to the recession?

The summer box office is doing great — against the odds. In 2007, Hollywood enjoyed its best summer on record in terms of total ticket sales, and no one expected this year to top that. Yet total box office revenues for the season are up.

Year-to-date, attendance remains down by 2.6%, but the gap is closing, thanks to the strength of the June box office, with admissions up a whopping 17.3% over June 2007.

Some see this as further proof that the film biz is immune to the econ-demic. In five of the last seven recessions, box office revenues increased; in three of those, so did attendance.

Combine the ailing economy with the cost of fuel, and you’ve got a perfect storm that is causing Americans to stick closer to home this summer and reevaluate where they spend their entertainment dollars. Going to the movies is still cheaper than going to a ballgame, concert or theme park.

“Though we don’t wish hard times on anyone, the cinema business tends to do very well during challenging economic times,” National Assn. of Theater Owners prexy John Fithian says. “It’s not that cinemas are recession-proof. We always need good movies to do well. But history shows that the industry is recession-resistant.”

It’s hard to say yet how the theme park biz will fare this summer, although some Wall Street analysts are beginning to predict that it’s bound to suffer, particularly with domestic airlines raising fares and cutting flights. However, a decline in the number of Americans traveling could be offset by a flood of tourists from other countries.

There’s even a new word to describe what’s happening as the nationwide average cost of a gallon of gas hovers above $4 for the first time: “stay-cation.”

A year ago, the nationwide average at the pump was $2.98. California has the highest gas prices, with a gallon of gas costing an average of $4.46 last week. (It’s $5 if you fuel up between L.A. and Las Vegas.)

Many studies have concluded that people won’t be going away as much this summer.

For the first time this decade, AAA is predicting a decline (of 1.3%) in the number of Americans traveling over the Fourth of July weekend. After Memorial Day, it’s is the second consecutive holiday to show a decline in travel.

A recent poll conducted by the National Retail Assn. shows that 60% of Americans say increased gas prices will affect their holiday plans, a huge jump from 41% last year. A new study by the Cambridge Energy Research Assn. reports that the number of miles driven by Americans is on the decline for the first time since the 1970s and early 1980s. The study predicts the decline will continue.

“The fact that the box office has held up as well as it has, even in the face of tough comparisons, may indicate that going to the movies is still considered by the public to be a relatively inexpensive leisure activity,” Fox co-topper Tom Rothman says.

There are several reasons why the multiplex is a beneficiary of the current gas crisis. For one, there are far more theaters in the U.S. than two decades ago, and a big summer movie can open in 4,000 locations, or 7,000-8,000 screens. All this means that, except for in the smallest towns, people don’t have to drive far to see the season’s talked-about movies.

“The mechanics of the theater business are much more neighborhood and energy-friendly these days,” Sony chair of worldwide marketing and distribution Jeff Blake says.

“The business plan is to give everybody a complete choice of movies. When you think back to the gas lines of the 1970s, people had to drive downtown and get in a long line to see a new movie, and maybe get turned away. That experience doesn’t happen anymore,” Blake says.

Hardest hit by America’s fuel crisis are smaller towns and rural areas, which already account for higher-than-average gas consumption, with farther distances and fewer methods of public transportation. Though they’re being KO’d by the fuel prices, these areas are not a factor in B.O., because rural areas have never been huge moviegoing markets.

With people cutting back on big-ticket summer travel and staying home, sooner or later they’re going to want to get out of the house. A dark, air-conditioned movie theater suddenly sounds very tempting.

“When times get tough, the movie business tends to hold up. More than ever, people want to escape, even if costs money to drive to theaters,” Overture’s Peter Adee says.

The domestic box office took off just as gas crossed the $4 mark in early June. In fact, the month is running 20.7% ahead of June 2007 in terms of box office revenues.

Especially heartening is the 17.3% uptick in the number of people going to movies in June. Even in times of growth for box office revenues, attendance can be down.

Carlo Petrick, communications manager of Milwaukee-based Marcus Theaters, the country’s seventh largest circuit, which operates 60 theaters, says there’s a combination of factors contributing to the hot summer. One is the economy and the other is a strong slate of films.

Theater owners are quick to point out that the studios were much better this year about spacing out their summer pics vs. last year, when the season was front-loaded with titans “Spider-Man 3,” “Pirates of the Caribbean 3″ and “Shrek the Third,” all of which opened in May.

And several pics are doing much bigger business than expected, such as M. Night Shyamalan’s eco-horror pic “The Happening” ($30 million in its opening) and New Line-Warner Bros.’ “Sex and the City” (which has cumed $132.5 million through June 22).

The business is more widespread than last year, when most of the booty belonged to just a few top-grossing pics. For instance, films placing No. 11 through No. 15 on the current B.O. chart have grossed an average of $37.6 million, as compared with an average gross of $19.3 million for their counterparts in 2007.

The June boom has caught studios and theaters alike by surprise.

“The success of all these different kinds of movies is tremendous,” Landmark Theaters CEO Ted Mundorff says. “I think it shows that people are continuing to go the movies, even in these tough times.”

Strangely, the average ticket price of $7.08 is actually down from the fourth quarter of 2007, when the average price was $7.11. The dip is because of the success of family movies this year, which drive the average price of a pic down, since children’s tickets are less. (The final average ticket price for 2007 was $6.88).

The average price could go down even more in the coming weeks.

Exhibs are always loath to talk about their financials, and won’t discuss how they are coping with their own internal economic pressures. Many analysts question whether the cost of concessions, and popcorn in particular, will rise as a result of the flooding in the Midwest.

AMC, one of the country’s three biggest circuits, recently raised the price of popcorn by 25¢ nationwide. It also upped weekend ticket prices from $9 to $10. AMC say there were a variety of reasons for the hikes, and not just the price of popcorn.

Theater owners are getting more and more income from onscreen advertising. New figures releasedin June show that there was an 18.5% gain in revenue to just shy of $540 million in 2007, up from $455.7 million a year ago.

The rise ticket price or concessions notwithstanding, moviegoing is still a bargain relative to many other forms of entertainment.